SULLIVAN LUKE JOSEPH v. CHAN SUK KUEN AND ANOTHER

HCMP 900/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 900 OF 2011

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J U D G M E N T

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1.  This is a vendor-purchaser summons. The parties entered into a provisional agreement for sale and purchase dated 15 January 2011 which was followed by a formal agreement dated 7 February 2011. The property is Flat C on the 6th Floor of Block 5 and Carparking Space A81 on Car Park Floor A, Phoenix Court, No. 39 Kennedy Road. The price is 9.39 million. Completion was due to take place on 15 March 2011. The transaction was not completed because of two requisitions on title. The plaintiff says that the defendant vendors have not answered the requisitions properly and, hence, failed to prove their title to the property. The defendants disagree.

2.  The first requisition was raised on 16 February 2011 by the plaintiff’s solicitors in relation to an assignment registered at the Land Registry by memorial No. UB4079565, “(the Disputed Assignment)”. The requisition reads:

“Upon perusal of copy Assignment Memorial No. UB4079565 (obtained by us from the Land Registry), we note that only ¼^th part or share of and in the Property has been assigned to So Cheong Hau Stewart by Chen Kwok Sez, (“the Vendor”) and the remaining ¼^th share of and in the Property was still vested in the Vendor.  However, copy Assignment Memorial No. UB4604293 (also obtained by us from the Land Registry) reveals that the entire Property was purported to be assigned to Tsang Kwok Hung and Lai Yuk Chun Cindy by So Cheong Hau Stewart and Chan Kwok Ying but the Vendor being the owner of ¼^th part or share of and in the Property has not joined in as a party thereto and executed the said Assignment.  In order to rectify such title defect, please provide us before completion with a Confirmatory Assignment/Deed of Rectification to be executed by the Vendor confirming the transfer of ¼^th part or share of and in the Property.”

3.  The solicitors for the defendants replied on 3 March 2011 as follows:

“It is apparent from the land search record and the 1^st Assignment that the discrepancy in the Property description was simply a clerical error and that ½ share and interest of and in the Property had already been transferred to So Cheong Hau Stewart by Chen Kwok Sez. The alleged typographical error can be disregarded and ignored by application of the general rules of interpretation or construction of instruments (See: the Halsbury’s Laws of England, (4th Ed. Reissue) Vol. 13, para 209).”

4.  The plaintiff did not accept the answer and insisted on rectification by a confirmatory assignment/deed of rectification by Chen Kwok Sez in favour of So Cheong Hau Stewart (“So”) before completion. 

5.  The defendants in the answer to this requisition also argued that this assignment pre-dated the root of title and that any claim of interest by Chen Kwok Sez had been barred by the Limitation Ordinance. These arguments are, however, not relied on by counsel for the defendants at the hearing, and I will not deal with them.

6.  The solicitors for the plaintiff raised the second requisition on 15 March 2011 in relation to the parking space.  It reads:

“Upon perusal of certified copy Memorandum with Amended Carpark Layout Plan Memorial No. UB1361772, we note that the above-mentioned building of Phoenix Court consists of, inter alia, three Car Park Levels known as Car Park Level 1, Car Park Level 2 and Car Park Level 3. However, Deed of Mutual Covenant Memorial No. UB1459830 and the Car Park Plan annexed to Assignment Memorial No. UB1475768 reveal that Car Park Space No. A81 is located at Car Park Floor A and not at Car Park Levels 1, 2 or 3. As such, please clarify the discrepancy and revert to us before completion.”

7.  The solicitors for the defendants replied also on 15 March 2011 as follows:

“Your attention is drawn to the fact that the Memorandum with amended Car Park Layout Plan Memorial No. UB1361772 (‘the Memorandum’) was registered prior to the Deed Of Mutual Covenant Memorial No. UB1459830 (‘the DMC’) and the first Assignment Memorial No. UB1475768 (‘the 1^st Assignment’). The plans annexed thereto were solely for the purpose of identification only and the proper description of the Property should follow that of the DMC and the 1^st Assignment. In our present circumstance, the location of the Car Park Space No. A81 can be clearly identified in all the respective plans annexed to the Memorandum, the DMC and the 1^st Assignment. There are clearly three levels of car parks in the building of which the Property forms part. We see no ambiguity at all and the fact that the naming of the plans as ‘Levels 1 to 3’ would not in any way affect the title of the Property.”

8.  The solicitors for the plaintiff were not satisfied.  They responded also on 15 March 2011 as follows:

“We write to clarify that car park plans annexed to Memorandum with Amended Car Park Layout Plan Memorial No. UB1361772 is not for identification purpose but is used to prove that the above-mentioned car park sold is a carparking space corresponding with the approved plans. If it does not so correspond, the car park would be in breach of the Conditions of Exchange No. 10710, and the Government would take enforcement action affecting the owner’s use and enjoyment (Chen Paul v Lord Energy Ltd (1999] 1 HKC 1, [1999] 1 HKLRD 205 CFA)). As such, your client is obliged to provide us with the evidence to prove that which levels of car park relate to or affect the car park sold.”

Analyses and Decision of the First Requisition

9.  Chen Kwok Sez and Chen Kwok Ying (“Kwok Ying”) purchased the flat and parking space from Dunmore Company Limited by an assignment dated 15 November 1977 and registered at the Land Registry by memorial No. UB1475768.  They purchased the flat and parking space as tenants-in-common in equal shares.  This is the first assignment of the flat and parking space. There are a plan of the flat and a parking-space plan showing Parking Space A81 annexed to this assignment.

10.  The plaintiff’s solicitors should have been aware of this assignment as it was by this assignment that Chen Kwok Sez became a tenant-in-common and owning half of the interest of the flat and parking space.  This first assignment was also referred to in the answer to requisition by the defendants’ solicitors.  The first requisition arose out of the fact that Chen Kwok Sez was the tenant-in-common owning one half share or moiety of the flat and parking space. 

11.  The next title deed is the Disputed Assignment dated 17 April 1989.  This deed was preceded by a formal agreement for sale and purchase made between Chen Kwok Sez and So of the same date.  By this agreement, Chen Kwok Sez agreed to sell to So one half share or moiety of 11/3,823^rd shares of Inland Lot 8376 and the exclusive right to occupy the flat and parking space.  Hence, Chen Kwok Sez agreed to sell to So all his interests in the flat and parking space.  This agreement was registered at the Land Registry by memorial No. UB4064518. Since this agreement was not mentioned in the first requisition or the answer thereto, I will not take it into consideration for determination of this dispute.

12.  I now come to the Disputed Assignment.  There are two recitals which read:

“A. Immediately before this Assignment, the Vendor and CHEN KWOK YING were the registered and beneficial owners of the Property (to be defined hereinbelow) as tenants-in-common in equal shares.

B.  The Vendor has agreed to sell and the Purchaser has agreed to purchase the one half share or moiety of and in the Property vested in the Vendor in manner as appearing below.”

13.  Recital A should thus be referring to the flat and parking space being owned by Chen Kwok Sez and Kwok Ying as tenants-in-common in equal shares as they were assigned such interests by Dunmore Limited in the last assignment.  The property is said to be defined in the lower part of this assignment.

14.  Recital B says that Chen Kwok Sez had agreed to sell to So one half share or moiety of the property.

15.  Reading both recitals together, it appears that Chen Kwok Sez had agreed to sell to So all his interests in the flat and parking space that he owned. 

16.  The operative part of the assignment then said that:

“IN CONSIDERATION of the sum of HONG KONG DOLLARS SEVEN HUNDRED AND FIFTH THOUSAND ONLY (HK$750,000.00) paid by the Purchaser to the Vendor (receipt whereof is acknowledged), the Vendor as Beneficial Owner Assigns to the Purchaser one half share or moiety of and in the property described in the Schedule hereto (“the Property”) TO HOLD the same unto the Purchaser for the residue of the term of years created by the Crown Lease.  …”

17.  The recitals and the operative part are therefore consistent as they all deal with one half share or moiety of the property.  By Recital A, the property is understood to be the flat and parking space though the recital says that the property is to be defined in the lower part of the deed.  This is also the understanding if one starts with the last assignment by Dunmore Limited which assigned the flat and the parking space to Chen Kwok Sez and Kwok Ying in terms as recorded in Recital A.

18.  However, the description or definition of the property in the schedule to this Disputed Assignment is problematic.  Instead of referring to the 11/3,823^rd shares of IL8376 and the flat and parking space, it referred to:

“ALL THAT one half share or moiety of ALL THOSE 11 equal undivided 3,823^rd parts or shares of and in ...” (emphasis supplied)

19.  Hence, when the operative part is read in conjunction with the schedule, Chen Kwok Sez appeared to have assigned only half of his half share in the 11/3,823^rd shares of IL8376 and the flat and parking space and retained ¼ of such interest to himself.  This caused the first requisition.

20.  However, the definition of the property in the schedule does not tally with the terms of Recital A as understood against the background that Chen Kwok Sez was the owner of half of the 11/3,823^rd shares of IL8376 and the flat and parking space.  The two would only tally if the words “ALL THAT one half share or moiety of” in the schedule are ignored.  If these words should be ignored, then the meaning and effect of the Disputed Assignment as a whole is clear and free of any problem.  Indeed, the backsheet of this assignment states that the parties being Chen Kwok Sez and So and that it was an assignment of one half share or moiety (and not one-fourth) of the 11/3,823^rd shares of the lot and the flat and parking space.

21.  The memorial No. UB4079565 which registered this assignment at the Land Registry also states that the premises affected by the assignment are “ALL THAT one/half share or moiety of all those 11/3,823^rd parts or shares …” and not ¼ of such interests.  I also note that the memorial has a reference to the formal agreement and its memorial number although I would not take this into consideration in determining the dispute.  The solicitors for the plaintiff admit that they were aware of this memorial.

22.  Reading the Disputed Assignment as a whole against the background that Chen Kwok Sez and Kwok Ying used to own the whole flat and parking space as tenants-in-common of equal shares and in conjunction with the memorial UB4079565, it is clear that the words “ALL THAT one half share or moiety of” in the definition of the property in the schedule of this assignment are superfluous and were put in by mistake.  Once these words are ignored, then there is no problem.  I therefore agree with the defendants’ answer to this requisition that the discrepancy in the description of the property in the Disputed Assignment is simply a clerical error. 

23.  I would also say that this is an obvious error and should not affect the defendants’ title to the flat and parking space.  I would refer to the words of Lord Hoffmann in Jumbo King Limited v Faithful Properties Limited [1999] 3 HKLRD 757 at 726:

“The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.”

24.  I also refer to Secretary for Justice v Wing Lung Wai Community [1999] 3 HKC 580 at 588 where Chan CJHC as he then was said:

“In my view, different conveyances use different descriptions of the parcel of land to be granted and adopt different formulae with regard to the use to be made of the plan annexed to the conveyance. If there is a dispute with regard to what is actually conveyed, that is a matter of construction of the whole conveyance, including the parcel clause and the plan, in the light of other relevant surrounding circumstances. The object is to ascertain what the parties intended to be passed under the document and what is passed.”

25.  I also refer to paragraph 210 of Halsbury’s Laws of England, 4th edition, 2007 re-issue, volume 13:

“210. Rejection of words, etc.

                   Since an instrument is to be construed according to the intention of the parties as appearing from the whole of its contents, it follows that that intention must not be defeated by too strict an adherence to the actual words, and any corrections may be made which a perusal of the document shows to be necessary.  Thus, wrong grammar and spelling may be corrected; words that are merely meaningless, or that are repugnant, or that have obviously been inserted or left in by mistake, or that are immaterial and surplusage, and even whole provisions, may be rejected; words may be supplied, though more sparingly, when it is clear from the instrument itself that they have been omitted by inadvertence, and words and clauses may be transposed.”

This paragraph has been referred to in the defendants’ answer to the requisition.

26.  Counsel for the plaintiff complained that the solicitors for the defendants had not identified the error in the answer.  But I think the error is very apparent to any conveyancer who reads the Disputed Assignment as a whole and with care.  I would also refer to the words of Litton PJ in Mexon Holdings Limited v Silver Bay International Limited [2000] 1 HKLRD 935 at 942F to G:

“A good title does not mean a perfect title, free from every possible blemish. Whenever a question like this arises, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain.”

27.  If the solicitors for the plaintiff should have borne these words in mind, then the first requisition would not have been a ground leading to this application.

28.  For the above reasons, I find that the solicitors for the defendants have provided a sufficient answer to the first requisition. 

Analyses and Decision of the Second Requisition

29.  The second requisition arose out of the difference between the designation of the car park floors in the Amended Car Park Layout Plans and in the DMC and first assignment.  In the layout plans, the floors are designated as levels 1, 2 and 3 whilst the DMC and the car park plan annexed to the first assignment refer to the floors as car park floors A, B and C. 

30.  From the second letter of the plaintiff’s solicitors dated 15 March 2011, it is clear that their concern was that the car park No. A81 on car park floor A as shown in the plan annexed to the first assignment should correspond to a parking space in the layout plans. Given that the concern is a simple one, it can be dealt with simply by looking at the layout plans for the three parking floors and comparing the parking space A81 in the plan annexed to the first assignment against them. 

31.  The plans for the three parking floors happen to be different from one another.  The layout plan for level 3 is the same as the plan annexed to the first assignment though the layout plan is of a larger scale.  Parking space A81 on the plan annexed to the first assignment can also be located and identified in the level 3 layout plan.  This is a very simple exercise of comparison which I did in court during the hearing with no difficulty.  The answer of the defendants’ solicitors that the location of parking space No. A81 can be clearly identified in the layout plans and the plan annexed to the first assignment is clearly correct. 

32.  In the circumstances, I find that the defendants have also given a proper answer to the second requisition. 

Judgment

33.  Since all the requisitions have been answered satisfactorily, I hold that the defendants have proved their title to the flat and parking space.  In the premises, I dismiss these proceedings with a costs order nisi that the plaintiff do pay the defendants the costs of these proceedings.  I also direct the parties to fix a 9.30 am hearing outside the next 14 days for summary assessment of the amount of costs payable unless there should be an application for variation of the costs order nisi made within the next 14 days or the amount of costs can be agreed.

(L. Chan) Deputy High Court Judge